Dodd-Frank News Center

Breaking News! New Report Analyzes the Unanimous Ruling Vacating the SEC's Proxy Access Rule

A Special Report has been prepared by Wolters Kluwer Law & Business Principal Analyst, Jim Hamilton, entitled, “D.C. Circuit Vacates SEC Proxy Access Rule as Arbitrary and Capricious”.  This report analyzes the unanimous ruling of the D.C. Circuit Court of Appeals that the U.S. Securities and Exchange Commission was arbitrary and capricious in promulgating the “proxy access” rule, Exchange Act Rule 14a-11.  

Click here to download the full report. 

Bank Regulators Issue Guidance on Counterparty Credit Risk Management

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The federal bank and thrift regulators have published guidance on how financial institutions should manage the risk that arises from the possibility that a counterparty in a transaction could default or that a counterparty's creditworthiness could decline before the transaction settles. The guidance, which is intended principally for organizations with large derivatives portfolios, emphasizes internal metrics and measurements and comprehensive stress testing. It was issued by the FDIC, Federal Reserve Board, Office of the Comptroller of the Currency and Office of Thrift Supervision.

Legislation Repealing Pay Ratio Provision of Dodd-Frank Passed Out of House Financial Services Committee

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and Hedge Funds and Private Equity: Regulatory and Risk Management Update.

Legislation repealing a provision of Dodd-Frank that would require public companies to disclose their median annual total compensation of all employees was reported favorably out of the House Financial Services Committee to the full House. The Burdensome Data Collection Relief Act, HR 1062, would remove Section 953(b) of Dodd-Frank, which directs the SEC to adopt rules requiring disclosure of the median of the compensation of the company’s employees and the ratio between the median of the annual total compensation of the employees and the annual total compensation of the issuer's chief executive officer. The vote was 33-21. The legislation has the support of the Society of Corporate Secretaries and Governance Professionals.

House Panel Approves Legislation Repealing Corporate Governance Provision of Dodd-Frank

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

The House Capital Markets Subcommittee approved legislation repealing Section 953(b) of Dodd-Frank. The Burdensome Data Collection Relief Act,HR 1610, introduced by Representative Nan Hayworth, removes a provision in Dodd-Frank that would require publicly traded companies to disclose their median annual total compensation of all employees. Two months after the Dodd-Frank Act was signed into law, the Financial Services Committee received testimony about the enormous burden and complexity this provision poses to publicly traded companies, with very little, if any, corresponding benefit to investors. The legislation was approved by a bi-partisn vote of 20 to 12.

Corporate Secretaries Society Supports House Legislation Repealing Pay Ratio Provision of Dodd-Frank

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

The Society of Corporate Secretaries and Governance Professionals supports House legislation repealing the pay ratio provision of Dodd-Frank. The Burdensome Data Collection Relief Act would repeal a corporate governance provision of Dodd-Frank requiring publicly traded companies to disclose their median annual total compensation of all employees. Under Section 953 of the Dodd-Frank Act, the SEC must adopt rules requiring new disclosures about the relationship between executive compensation and company performance, and the ratio between the median of the annual total compensation of an issuer's employees and the annual total compensation of the issuer's chief executive officer.

SEC Adopts Executive Compensation Rules

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Securities and Exchange Commission has announced the adoption of final rules implementing the Dodd-Frank Act requirements for shareholders' “say on pay” and golden parachutes. The rules increase the required disclosures while creating exceptions for smaller companies. All relevant shareholders votes would be advisory. 

Beginning with the first annual shareholders' meeting after Jan. 21, 2011, companies that are subject to federal proxy rules must provide shareholders with an opportunity to cast an advisory vote on executive compensation. The vote must be permitted at least once every three years. The annual meeting proxy statement must disclose whether a vote will be taken, whether that vote is non-binding and how the company considered the results of the prior vote.

Business Groups’ Brief Attacks SEC’s Adoption of Proxy Access Rule as Fundamentally Flawed and Unconstitutional

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

The SEC’s adoption of a proxy access rule was based on a fundamentally flawed assessment of the rule’s costs, benefits, and effects on competition and capital formation and effected an arbitrary nullification of state law rights for director elections, said a brief filed jointly by the Business Roundtable and US Chamber of Commerce in their federal appeals court action seeing vacatur of the rule. Filed in the DC Circuit Court of Appeals, the brief also argued that it was arbitrary for the Commission to adopt the rule rather than let shareholders decide for themselves whether to adopt an access mechanism, given the SEC’s stated purpose of empowering shareholders in connection with director elections and its admission that the rules could harm corporate performance. The brief also argued that the proxy access rule violates the First Amendment. On a subsidiary point, the brief contended that the rule arbitrarily and capriciously includes investment companies within its embrace. Business Roundtable and US Chamber of Commerce v. SEC, US Court of Appeals for the District of Columbia Circuit, No. 10-1305, Nov. 30, 2010.

Wall Street Pay Practices Have Worsened, Report Finds

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, Nov. 30, 2010.

Pay practices at leading financial institutions have, on balance, worsened, despite enhanced federal oversight of Wall Street, according to a new report from the Council of Institutional Investors.

The report considered practices at six firms: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo, and acknowledged that some improvements have been made. These include strengthened or expanded clawback provisions, more incentives paid in equity, increased deferral periods, as well as lower cash bonuses and higher base salaries.

Comments on SEC Proxy Voting Concept Release Explore Regulation of Proxy Advisory Firms, New Dodd-Frank Mandates Heighten Concern

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

Comments received by the SEC on its proxy voting concept release, 34-62495, reveal a growing consensus in the corporate community that proxy advisory firms should be subject to federal regulation requiring greater transparency and accountability with respect to the formulation of voting recommendations and potential conflicts of interest. For example, in its comment letter to the SEC, General Mills said that proxy advisory firms should be subject to proxy rules and regulated as investment advisers, including mandated disclosure of specific conflicts of interest, and duties to adopt procedures ensuring the accuracy of their reports and voting recommendations. But Nell Minow of the Corporate Library objected in the strongest possible terms to the federal regulation of proxy advisory services, noting the absence of evidence that the proxy advisory firms have been anything but transparent about their approaches and the way they deal with conflicts of interest.

Basel Committee Issues Corporate Governance Principles, Strong Role Seen for Internal and External Audit

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

The Basel Committee has issued corporate governance principles emphasizing transparency, aligning executive compensation with prudent risk taking, and making more and better use of internal and external auditors. A central principle envisions the board and senior management making very broad use of internal audit and effectively engaging the independent outside auditor. Independent and qualified internal and external auditors, as well as other internal control functions, are vital to the corporate governance process, said the committee.